BETFAIR SP

The SP or to give it its full name Starting Price is something which has been around for decades, and traditionally it is used by off course bookmakers to return a price for each horse in a race. The way the SP has traditionally been calculated is an SP returns person will be at the racecourse and when the race is off he will go around and ask a selection of book makers would price they had for each horse prior to the off.

He will then use the consensus to return an SP for each runner. The Betfair SP works on the same principle, as it is calculated using the average price available at the off for each runner. The advantage however is that you get a 100% book. Betfair guarantees to cover any bets where there is not enough liquidity in the market. 

A bookmaker typically uses a 115% - 118% book and sometimes as much as a 130% book. The difference between the book value and 100% is called the overround, so a 118% book would have an overround of 18%. The overround is another word for the bookmakers profit. In theory on a 118% book , for every £118 the bookmaker takes in bets they will have to pay out £100. With Betting Exchanges you don’t have any overround, only a commission charge which is normally around 5%. So it is called a 100% book. This is the theory. The practice is that in the long run because of its nature backing the Betfair SP will make you more money than backing the Bookmaker SP.

The example below illustrates this. Below is a typical meeting at Lingfield  (6/2/08) and the difference in SPs from the Bookmaker to Betfair is shown.

 

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